SocGen, Unicredit On “Brink Of Disaster”?…Next up: bank runs.
by Tyler Durden
Over the past 48 hours we had heard pervasive rumors that at least one, maybe more, banks in Europe are on the verge of collapse. Our thought was, naturally, Dexia, which is the modern equivalent of AIG, not to mention the bank most rescued by none other than the Federal Reserve. Well, we were wrong. And if the Daily Mail is correct, the two banks about to kick the bucket are French SocGen and Italy’s UniCredit. While the fact that these two banks are in trouble has not been lost on the market, which has been sending their CDS to near record highs, the speculation that they are far closer to implosion likely means that the equity value of the European banking sector is about to be decimated. As the News reports: “The merest hint a major bank might fall is likely to reignite panic tomorrow in the stock market, which is already feared to react badly to the credit downgrade of the U.S. by rating agency Standard & Poor’s.” Well, it’s now tomorrow.
More from the UK mag:
Fears are growing this weekend that two of Europe’s largest banks may require a bailout, having been hugely damaged by the worsening crisis across the eurozone.
In France, President Nicolas Sarkozy is having to confront the possibility that the country’s second-biggest bank, Societe Generale -commonly known as SocGen – is on the brink of disaster after huge losses over loans made to Greece.
The chilling possibility of the largest bank in Italy, UniCredit Banca, suffering a similar collapse if a bailout is not implemented comes as Silvio Berlusconi already faces an increasingly dangerous national economic situation.
Next up: bank runs.
In Britain, a senior Government source described the position of the two banks as ‘perilous’, although an official Treasury spokesman declined to comment. Should either bank collapse, British customers with deposits of up to about £85,000 would be protected by the Financial Services Compensation Scheme.